When the time comes for your client to sell their home and either downsize into a smaller property due to an ‘empty nest’, or move-up into a bigger home because of the expanding family – you will need to make sure your seller/buyer is prepared for the dual transaction which awaits.
Some sites such as Realtor.com and Zillow.com suggest advising the seller to get a bridge loan for their down payment or to take out a HELOC on their existing property. While this may work for some seller/buyers, there is a possibility your client may be left holding two mortgages— depending on how long it takes for their existing property to sell.
An alternative solution is to have your seller/buyer close the escrow transactions simultaneously. I’ve done several of these transactions this way and this option prevents the client from needing to secure additional and often unnecessary financing. More importantly – they won’t be stuck with several mortgages on 2 different properties.
Here are my helpful tips from a lender’s perspective to ensure your simultaneous closing occurs with minimal delays:
- EMD – most clients (and often their agents) will consider their net proceeds from the pending sale as the funds needed for their down payment when writing an offer. However, if the seller/buyer has no liquid assets for the typical 3% earnest money deposit (EMD) then they will either need to obtain gift funds or possibly have their agent negotiate a lower EMD to 1% for example.
- COE – Schedule the closing for the sale of their home a few days prior to the close of escrow on the new purchased property. This will ensure the net proceeds can be deposited into the purchase escrow in time to close on time.
- Net Proceeds – Transfer net proceeds from sale of home into the seller/buyer’s account and then wire the funds directly into the purchase escrow. By doing so, the buyer has created a direct paper trail which can be easily traced and documented by the lender’s underwriter.
- Bank Account – To help avoid additional documentation and potentially adding more last minute conditions – advise your client to have the net proceeds from the sale of their existing home into an account which has already been verified by the underwriter. Otherwise, 2 more months’ bank statements will be required. The last thing anyone wants to hear at this stage of the transaction – is more documentation is needed.
Contributor, designer & admin for JohnHart Gazette.
it means the lender is winllig to sell it for less than whats owed on it, means nothing to the buyer, implies a bargin, but not necessarily true, unless they are selling it for less than what the current appraisal is. far to many folks in todays world got inflated appraisals, borrowed the maximum up to 100 or 125% of the apprasied value, yes u could borrow more than the property is worth, then they defaulted and the lenders have gotten the properties back where the borrower owed more than they are worth, so the lender is selling for less, they call it a short sale, but dont always tell u the true value, be careful, due your due dilegence and get a good current appraisal, dont let the realtor or lender tell you well it appraised for x dollars 6 months ago, get a current one before making a decesion gl.References : Was this answer helpful?